Drews Co. v. Ledwith-Wolfe Associates, Inc.
296 S.C. 207, 371 S.E.2d 532 (1988)
Rule of Law:
A new or unestablished business is not automatically precluded from recovering lost profits for a breach of contract; however, such profits must be proven with reasonable certainty through sufficient, non-speculative evidence.
Facts:
- Ledwith-Wolfe Associates, Inc. ('Owner') contracted with The Drews Company, Inc. ('Contractor') to renovate a building.
- Owner intended to operate a new restaurant in the renovated building.
- The construction contract did not contain a specific completion date.
- The renovation project was characterized by significant construction delays and disagreements over the quality of the work.
- Contractor ultimately ceased work and removed its workers from the project before completion.
- The delays in completing the renovation caused a postponement of the restaurant's opening.
Procedural Posture:
- Contractor, The Drews Company, Inc., filed and sued to foreclose a mechanic's lien against Owner, Ledwith-Wolfe Associates, Inc., in a South Carolina trial court.
- Owner filed a counterclaim against Contractor for breach of contract, seeking damages for the cost of re-doing work and for lost profits.
- Following a jury trial, the jury awarded Contractor $18,000 on its complaint.
- The jury also found for Owner on its counterclaim, awarding $22,895 for rework costs and $14,000 for lost profits.
- The trial court denied Contractor's motion for a new trial.
- Contractor, as the appellant, appealed the judgment to the Supreme Court of South Carolina.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the 'new business rule' automatically preclude a new, unestablished business from recovering lost profits as damages for a breach of contract?
Opinions:
Majority - Justice Harwell
No, the 'new business rule' does not automatically preclude recovery of lost profits by a new business, but instead operates as a rule of evidentiary sufficiency. The court formally abandons the prior per se rule that treated anticipated profits from a new business as too speculative for recovery. Instead, a new business may recover lost profits if they are proven with 'reasonable certainty.' To do so, the plaintiff must establish that the profits were a natural consequence of the breach, were foreseeable to the parties at the time of contracting, and can be calculated based on facts, not conjecture. In this case, Owner's evidence, consisting only of gross profit figures and a speculative estimate of net profits, was insufficient to meet the reasonable certainty standard. Therefore, the jury's award of lost profits was reversed.
Analysis:
This decision officially aligns South Carolina with the modern majority view, transforming the 'new business rule' from an absolute bar to an evidentiary standard. By doing so, the court provides a pathway for new enterprises to recover lost profits, a type of damages previously unavailable to them. The ruling shifts the legal focus from the age of the business to the quality of the evidence presented, requiring new businesses to use concrete data, such as market analyses, expert testimony, or records of similar businesses, to meet the 'reasonable certainty' standard. This creates both an opportunity and a significant evidentiary burden for new ventures seeking damages for breach of contract.
Gunnerbot
AI-powered case assistant
Loaded: Drews Co. v. Ledwith-Wolfe Associates, Inc. (1988)
Try: "What was the holding?" or "Explain the dissent"